A columnist at TheStreet.com says that President Bush's plan to privatize Social Security doesn't tackle the underlying problem of investor education. Directing 4% of the 12.4% of payroll checks that American workers currently pay in Social Security taxes toward private accounts will not help Americans save adequately for retirement, for studies have shown that 401(k) investors are notoriously apathetic when it comes to updating their portfolios.

According to an Ernst & Young survey on the success of nationwide 401(k) programs, 83% of employers surveyed offered some kind of financial training for employees. But this hardly mattered to 401(k) plan participants. There were still employees who did not enroll in their employer's 401(k) plan, and less than 5% of those who received financial training altered their asset allocation.

The one thing that did cause plan participants to be more proactive in making investments was personal assistance programs. For instance, more than 47% of employers who offered telephone counseling for 401(k) plans saw increases in plan participants.

TheStreet.com argues that there are many rules that need to be administered to ensure the effective functioning of private accounts, including precluding employees from withdrawing funds before retirement or borrowing against their account. Also, the financial Web site says investment options should be stripped down so as to not confuse investors.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.